Tax talk and the economy

March 25, 2013

Watching the State of the Union address, I was amazed at just how clueless and divided our elected officials are as to what the real problems are. I'd apply that same thought to a majority of registered voters.

Government spending on some things might create some jobs, things like an investment in infrastructure and roads. Of course that's under the assumption that the money is spent on necessary projects, not roads and bridges to nowhere. Other than that, we (the United States) cannot spend our way out of our economic dilemma. What we can do and should do is to change tax law, quickly and dramatically.

Tax laws should be written or rewritten, and I include tariffs and things like that as taxes, to make it unprofitable to build things overseas and sell them here. This would force those so-called "Job Creators" to create jobs here, not in China and other Third World countries. The increase in middle class wages would be more than enough fuel to restart the economy at all levels, including housing.

Once again, I see more people reverting to the Ronald Reagan era talk of a "Flat Tax" and the VAT, or Value Added Tax. Well, there were things wrong with it then, and there still are. The most obvious issue is that both are totally regressive taxes, hitting those least able to afford them the hardest. The figures used for the tax, just like decades ago, are way too low. Most reasonable estimates suggest that a Flat Tax would have to be at least 20 percent. That would lower taxes on the richest among us by 13 percent and raise it on everyone else to make up for it. There are ways to do it though, and it would be almost as simple.

If the government were to replace the current Income Tax with a graduated, or segmented Flat Tax, that could work. Let's say for conversational purposes a Flat tax were 5 percent for the first $20,000 you made, 10 percent on the second $20,000 (or portion thereof) that you made, and continued in that way until you hit a tax of 40 percent 0n everything over $160,000, it could work.

The IRS would be cut to the bone, saving millions of dollars and anyone could do their own taxes with a simple calculator. No deductions either, none at all. And another sacred cow hit, ALL income treated as income, including Capital Gains. Now the money is rolling in, it's progressive, fair and no exceptions, everybody pays. Millionaires are paying about 35 percent now, so not a huge hit to those so many seem to worry about.

I'd add a national sales tax just big enough to place every individual in the country under Medicare, and totally scrap all other health-care programs. The savings from eliminating competing systems ought to lower costs a great deal, and the National sales tax dedicated JUST to Medicare ought to pay for it. (No, I don't know what that tax would have to be, but I'd guess around 3 percent.)

I'm not sure what I'd do with schools, but I can tell you funding would not be a property tax, a hugely regressive way to fund education, and even harmful to the elderly. Since our rankings in all educational categories (for public schools) are lower than most industrialized nations, some obvious changes need to happen there. One thing for certain, no unfunded mandates could ever occur either from the federal or state government. Serious changes would occur on discipline, who attends normal schools, all of that. Anyway, that's for another day, it's too complicated for an economic discussion. That being said, school taxes are the fastest rising of all property taxes, and the most regressive way possible to fund schools. I'm not sure if I'd use a dedicated sales tax, an income tax, but it wouldn't be a property tax.

No government program would be safe from cuts until we were back on track. No, I would not cut food, housing and clothes for the poor. I would gut every other aspect of it though, and since Medicaid would no longer exist, I'd guess Social Services would be cut by 50 percent or more.

Nobody wastes money like the military. The military wastes so much money they are almost professional at that particular task, from weapons programs that don't work to weapons programs that aren't necessary, all costing literally billions of dollars. That doesn't even include things like spending millions of dollars so the Army could feel more Esprit De Corps with a change of hats. (That did happen, when some idiot general decided to equip the regular army with Black Berets, previously worn proudly by Army Rangers, who actually earned that particular head gear.)

I hate to tell you, but this sort of waste in the military isn't unusual, it's commonplace. So when the handwringing starts about cuts putting our soldiers in harm's way, don't you believe it. By the way, have you seen our superior military equipment put down any enemies in rapid fashion?

No, you haven't. We do more with small groups of specialized and highly trained troops, and for a lot less money. I'd have to say the most frustrating thing about "Special Ops" has to be watching those above you ignore the information you bring them. But by golly we have new tanks, planes and ships we don't need!

Eliminating or reducing Social Security is just nonsense. Eliminating the cap on wages taxed for Social Security is the one thing that needs to be done immediately. I'd advocate a means test before I'd change the age for collecting. It's easy for people who work in offices to advocate for those who work physically to work longer. Does anyone really need to point out the differences between a 70-year-old roofer and a 70-year-old realtor?

Unfortunately for us all, political dogma still rules most of the discussions on fixing anything in this country. It makes no difference if facts show both sides of any economic issue to have theories full of holes; it generally will not change the discussion one bit.

Vested interests run and own everything, including a large percentage of our elected officials. So, do you think any significant changes are on the horizon?